Healthsouth Vs Scrushy Scandal

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In early 2003, the Securities and Exchange Commission announced fraud charges that it was filing against HealthSouth and its Chief Executive Officer (Securities and Exchange Commission [SEC], 2003). As "one of the nation's largest health care providers," HealthSouth provides many health care services including surgery and rehabilitative services (SEC, 2003). The Chief Executive Officer and Chairman, Richard M. Scrushy, was the mastermind of the fraud operation (Washington Post, 2004). By significantly overstating earnings to match investor expectations, Scrushy and his company committed a plethora of fraudulent accounting entries (Washington Post, 2004). Perhaps with proper checks and balances and a culture that trusts rather than hushes whistleblowers, accounting fraud such as this would be avoided or at least stopped in its early stages. In 2003, the Federal Bureau of Investigation looked into the accounting…show more content…
They alleged that HealthSouth and Scrushy's actions "violated and/or aided and abetted violations of the antifraud, reporting, books-and-records, and internal controls provisions of the federal securities laws" (SEC, 2003). Due to these violations, the SEC sought "a permanent injunction against [HealthSouth] and Scrushy, civil money penalties from both defendants, disgorgement of all ill-gotten gains and losses avoided by both defendants as a result of the conduct alleged plus prejudgment interest thereon" (SEC, 2003). Not only did the SEC want the penalties listed above, but also requested the following: An order (i) prohibiting Scrushy from serving as an officer or director of a public company, (ii) freezing the assets of Scrushy, (iii) requiring [HealthSouth] to escrow in an interest-bearing account, all extraordinary payments (including compensation) to any director, officer, partner, controlling person, agent, or employee, and (iv) preserving [HealthSouth]'s documents. (SEC,

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